Consumer Involvement in Product Creation and Design

Following is my assignment I submitted for 'Consumer Behavior'. I used Guy Kawasaki's Alltop.com as the live case to reinforce the stand :). Thanks Guy.

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Introduction

Consumer is the king and Consumer behavior is mainly driven by the trends they follow in searching for, purchasing, using, evaluating and disposing of products and services that they expect will satisfy their needs. Consumer spend their resources (time, money, effort) to decide what, why, where, when, how to and how often to buy the particular product of service. When consumer is everything and decides everything about the product and life of the product it is really beneficial to involve customer right from the beginning of the product Creation and Design. This results in ‘win win’ for both the consumer and organization.

Consumer

A consumer is a person who uses any product or service. Consumer can be considered as an aggregated commodity item with little individuality other than that expressed in the buy/not-buy decision. However there is a trend in marketing to individualize the concept. Instead of generating broad demographic profile and psychographic profiles of market segments, marketers are engaging in personalized marketing, permission marketing, and mass customization.

In free market or capitalist economies, consumers are presumed to dictate what goods are produced and are generally considered the center of economic activity. Individual consumption of goods and services is primarily linked to the consumer's level of disposable income, and budget allocations are made to maximize the consumer's marginal utility.[2] In 'time series' models of consumer behavior, the consumer may also invest a proportion of their budget in order to gain a greater budget in future periods. This investment choice may include either fixed rate interest or risk-bearing securities.

Consumer is the key player who decided the future of everything around him. The business who can satisfy Consumer can fulfill the targets is the mantra for the modern economy.

Product Creation and Design

R&D mainly consist of product development and design along with the research. Thus, it is more of developing better products from the existing ones than developing something new from a scratch, like a new medicine.

“In general, R&D activities are conducted by specialized units or centers belonging to companies, universities and state agencies. In the context of commerce, “research and development” normally refers to future-oriented, longer-term activities in science or technology, using similar techniques to scientific research without predetermined outcomes and with broad forecasts of commercial yield.”

The key reasons why R&D exists in companies are the constantly changing markets and customer needs. Customers’ needs change all the time which means that old products will eventually become outdated and thus less desirable. This implies that the company that can respond fastest to the changing trends will collect the pot. In addition, the supply of competitors is always varying, which means that no company can really rest on its laurels but has to keep up the pace. This is where R&D comes into the picture. An efficient R&D makes it possible for a company to be competitive also in the future, when today’s products have become just a vague image in history. Wheelwright and Clark (1992) have summarized well the three driving forces behind R&D. They are intense international competition, fragmented and demanding markets, and diverse and rapidly changing technologies. These are explained in more detail below :

Intense international competition. In every business, the amount of global competition has been on the increase. This has made the business more intense, demanding, and rigorous, because companies are punished out of small mistakes immediately.

Fragmented demanding markets. The modern consumers have become more sophisticated. When possible, they expect to have personalized products and also the demand for quality is increasing.

Diverse and changing technologies. The development of new technologies and better understanding of the existing ones means that there is an increasing amount of solutions available for engineers and marketers in their quest for creating new attractive products.

The three forces mentioned above are common for all industries, but they are especially important for young technologically dynamic industries like the mobile device industry. When the technologies are constantly changing, it is already a challenge to keep up the pace, not to mention when a company should create something new and innovative.

Customer Involvement

Consumer Involvement can be in the following form :

a) Collecting data and the feedback from the consumer

b) Collecting the data regarding Consumer Preferences and Behaviour and then coming up with the product as per the suggestions

c) Involving consumer right from the beginning to end of the product life cycle i.e. from initial decisions to launch of the product till the time to replace the product.

The rigorous global competition, the numerous of market segments and niches and the accelerating technological change have created three major competitive imperatives: speed and responsiveness, productivity, and quality. Involving consumers would create value for all the three following competitive imperatives.

Speed and responsiveness - The intensive competition and the need to fulfill the customers’ changing needs have forced companies to invest in shorter development cycles and better targeted products.

Productivity - The exploding product variety and competition in every area has made companies to put emphasize on product development productivity. In new technology companies this amount is larger than in the more mature markets. For example in 2006, an estimate for Ericsson’s R&D costs was almost 25% of its revenues3. This means that even a small increase in productivity can lead to the saving of millions of dollars.

Quality - The intense competition and the demanding customers have put companies in the position where there has to be creativity well combined with overall product quality.

In brief, product creation and design is a major battle area where one has to make big decisions and balance between long term technology decisions and short term product content decisions. This means that the development of a new major technology or platform has to be started well in advance for the products that are to be implemented on top of these technologies later on. A company has to have a long term vision. The success today does not guarantee success later on. Hence the continuous involvement of the consumer will ensure that the product or the service is meeting the expectation and as per the need of the market place.

Why Consumer Involvement ?

Consumer Involvement in Product Creation and Design is must for the following:

1) Consumer Needs

2) Simplicity

3) Innovation – Consumer Creativity

4) Customization

5) Co-creation

1) Consumer needs

As per the basic definition of consumer behavior the consumer need is the only thing we have to cater, the means and manner can differ. The best people to understand consumer need are the consumer themselves. In Needfinding, a main principle is to look for needs, not for solutions. To do so, the methods to generate customer information are focused on data related to what people actually are striving to achieve when taking actions. Hence, goals, contexts, actions and behaviours matter and are probed for by the Needfinding team. A common approach is a combination of methods relying on observations and interviews. In practice, the way in which the study is undertaken will be context dependent. The search for data should be performed by a multidisciplinary team, in which the idea is that designers and consumers should participate.

In view of the identified differences it can be concluded that the input from a needs-based approach differs in terms of the kind of data that would result in a need statement. Such an approach provides rich and contextual information about people’s activities and goals, while a typical product development approach provides rich and detailed information about the products that customers use. Thus, a need-based approach supports innovative and new products and traditional product development seems to support improvement of existing products. Yet both are important to develop functional products. The challenge of integrating the two stances is identified as related to cultural and historical formative issues. Designers are well acquainted with product improvement from a technical point of view, but needs identification is likely to require a non-trivial shift in perspective and in particular will rely on a broadly sociological ability – the ability to observe human beings.

2) Simplicity

Simplicity is the key to success. Taking example of the Google case, the whole business and revenue model was based on the simplicity. Google continuously take the feedback from the users and try to implement which will fit their model and feasibility. In fact companies like Google have the system where the user can even upload their own snippet of the code or small utility to the Google Labs and the same will be made public after little testing and checks.

3) Innovation – Creative Consumer

Mahindra and Mahindra recently ran the contest where they came up with the ‘SandBox’ competition where employees have to submit the new venture where company should look for future businesses. Within a week company got almost 1200 responses and most of them were really good. This was the first of its kind drive in the company and the responses which were shortlisted were being implemented as future cutting edge technology.

Now a days Customers are not only just consuming/imbibing the products however at the same time they are thinking and marching ahead in the thought process. As the Article in ‘Economist’ suggest consumers are the future of the innovation as there is tremendous rice of the creative consumers.

Taking the advantage of Web 2.0 the companies constantly collects the consumer’s creative thinking through the blogs, the online forums and the discussions. Lot of emphasis is given for the consumer to comment on the existing products or service and at the same time organization continuously tries to tap what consumer is thinking to have the features/facilities in future. The innovative ideas have started flowing from the consumers to organizations.

As per Charles Leadbeater “Innovation was once the work of an individual. Now - from weblogs to mountain bikes - we are inventing the things we want to use”.

Example

To take an example, Research Internation (RI) implemented the tapping of creative consumers idea. In two half day clinics, the RI team designed a strategy of using 12 participants from its Creative Consumers who are leveraged in RI's ideation process in order to bring a unique perspective to the ideation session - they are extraordinary lateral thinkers and are able to create multiple solutions to a problem from diverse perspectives. Creative Consumers also bring an unparalleled energy to sessions, which is critical to develop the breadth and depth of ideas needed. All Creative Consumers undergo a rigorous application and interview process, testing and training.

Through various exercises, RI was able to gain insight into consumers' thoughts on the new formulation and capture consumer language that could be used to convey the benefits of the product in television and print ads.

These new ads were presented to the Creative Consumers to obtain recommendations and capture additional language for optimizing the advertisements.

4) Customization

Today in the era of the Customization every organization want to achieve the highest degree of the customization for their customers. The concept of mass customization is attributed to Stan Davis in Future Perfect and was defined by Tseng and Jiao as "producing goods and services to meet individual customer's needs with near mass production efficiency". Kaplan and Haenlein concurred, calling it "a strategy that creates value by some form of company-customer interaction at the fabrication and assembly stage of the operations level to create customized products with production cost and monetary price similar to those of mass-produced products".

Increasingly, firms adopt mass customization, which allows consumers to customize products by self-selecting their most preferred composition of the product for a predefined set of modules. The best information regarding the customization can come from the consumers only as they are the one who decides whether customization is required and how much can be used.

Example

PC vendors such as Dell allow customers to customize their PC by choosing the type of processor, memory size, monitor, etc. However, how such firms configure the mass customization process determines the utility a consumer may obtain or the complexity a consumer may face in the mass customization task. As per Michael Dell’s recent visit to India during a talk show with the MBA graduates, he himself was trying to get the feedback from the students where and how the customization can be increased in the Dell’s product range.

5) Co-creation

Co-creation is the practice of product or service development that is collaboratively executed by developers and stakeholders together. Isaac Newton said that in his great work, he stood on the shoulders of giants. Co-creation could be seen as creating great work by standing together with those for whom the project is intended. Organisations are now a days involving the consumers in the Co-creation activities.

Consumer Involvement: Live Case Study – AllTop.com

Guy Kawasaki, former Apple Evangelist, author, venture capitalist, Truemors creator, and Top 100 Technorati blogger, launched Alltop.com. True to his mantra-making form, he describes Alltop as an “Online Magazine Rack.” It’s an apt description. Alltop’s main page feels like an online version of the magazine section at a Borders or Barnes and Nobles.

Guy made it simple and sure hit marketing strategy for the Alltop. All the marketing is done through the means which don’t cost him at all. The best way he chose is Twitter.com. Twitter is the micro blogging site where users can post the tweet upto 140 characters and the users who are following you can see your tweets directly on their pages.

Guy extensively used Twitter to market the Alltop. The only fundamental concept used by the Guy in marketing of AllTop.com is ‘consumer involvement’. Guy personally all the possible tweets and make it a point to implement the feasible solutions right their in time. To take an example when I wrote to Guy that there is no result for the ‘BarCamp’ on Alltop within a half hour he made arrangements to include the same. This not only made me feel good but also motivated me to give more feedback as I can see the implementation. When I have done a little research what I revealed that the success of AllTop.com is just because of the way he used Twitter and mass consumer involvement. Almost 80% of the Alltop topics are suggested by the users and as it implemented for me the same will be implemented for all. The Customer involvement satisfies customer needs, achieves simplicity, involves Innovation which implements the Consumer Creativity and attaing the customization through co-creation.

Conclusion

The organization and the market today don’t have any option other than involving customers in the product creation and design phase. The Co-Creation and the Customer involvement goes hand in hand and contributes hugely to the success of product and service.

The organization need to alleviate and go to next level in the value creation where involving customer will not only customary but mandatory. The Customers will not be only the king and driving the business however will be playing lead roles in the evolving, design, creation and implementation of the products or service.

References :

• A database of examples of Consumer involvement in Research by Paul Dixon, Edvina Peart and Roy Carr Hill
• Consumer Behaviour by Leon G Schiffman and Leslie Lazar Kanuk
• A need-based approach to product development by Ericson, Åsa
• Guy Kawasaki Blog – How to Change the world - http://blog.guykawasaki.com/